Doug Casey on Labor Unions

Contrarian investor and free-market thinker Doug Casey doesn't
mince his words. That's why he is a sought-after speaker at investment conferences
- not only for his spot-on investment advice but for his no-holds-barred
views of the markets, economy, and politics. In light of the recent events
in Wisconsin, here are his musings on labor unions.

L: Doug, we recently talked about turmoil arising from the clash between
labor unions clinging to wages from the fat years and bankrupt governments
facing lean-year budgets. You saw that as a sign of more imminent chaos - a
warning worth giving - but we didn't really get into the subject of labor unions
themselves. Knowing your philosophical bent, I'd bet your views on them might
surprise many people...

Doug: My take is that there's nothing inherently wrong with unions,
as long as they are voluntary associations of people - they're just associations
working in certain trades or in certain places. It's natural. Sure, why not?

But there are problems with the way unions exist in reality today, particularly
when membership is made mandatory. That's a violation of the human right to
work. When you can't work unless you join the union, and union membership is
limited - often to people with political connections or family relations with
union officials - it's clear that the union is not a defender of the little
guy, but a kind of protection racket. It's a fraud.

That doesn't just harm the individual worker who may wish to enter a unionized
field; it has broad economic consequences. When only union members can work,
the union can set wages at whatever level they want. That makes the product
or service in question more expensive for everyone in society. In other words,
unions don't help the average working man - they only help those who can get
into the unions. They hurt everybody else: non-union workers, employers, and
consumers at large. And it gives union bosses extraordinary power.

L: Always a dangerous thing. As a matter of principle, whenever unions
get politicians to write their wishes into law, what they do ceases to be collective
bargaining and becomes naked coercion. And of course the politicians pander
to the big unions; unions are big blocks of voters. How could it be otherwise?

But Doug, you're the capitalist's capitalist, the world's most unabashed defender
of wealth accumulation - aren't you supposed to hate labor unions? Don't you
risk being kicked out of the cigar club for The Evil Exploiters of the Masses?

Doug: First off, there's no way I'm giving up my cigars - especially
those from Cuba. But how could I object to voluntary associations of people?
If unions were more like the Lions Club or Rotary Club - both of which simply
encourage people to get together and act in unison - I'd have no beef with
any of them. But the fact of the matter is that labor unions, guilds, and so
forth are not truly voluntary associations. And that's entirely apart from
the corruption that the union movement is riddled with - not just in the U.S.,
but everywhere in the world.

The good news, however, is that coercive unions are on the way out. They're
anachronisms. They're leftovers from the time when people were like interchangeable
parts in the giant factories they worked in. People were so replaceable that
one person was little better or worse than another - because they were basically
biological robots. In the early industrial era, labor was in oversupply, society
was poor, and conditions were harsh everywhere. It's understandable why workers
felt they had to band together for self-protection. But the industrial era
is gone. The assembly line with thousands of workers is totally outmoded. In
the global information age, trying to extort high wages for manual labor is
pointless. Soon robots will be doing almost everything, then nanomachines will
replace the robots. People will only be doing work that requires thought, judgment,
and individuality. Those aren't things that can be unionized.

L: I've long thought that Big Labor was a rational market response
to Big Business, a lot of which relied on rote behaviors back then. If you
were just one little guy on the assembly line and your supervisor didn't like
you, what chance did you stand without the backing and solidarity of your fellow
laborers? Unfortunately, huge industrial concerns were highly vulnerable to
sabotage - it's hard, for example, to police thousands of miles of railroad
tracks.

I believe that weakness in the soft underbelly of tight-fisted business owners
proved too tempting a target for many workers. And that sort of thuggery prompted
management to hire thugs as well, to intimidate workers. I can't really say
who started it, but tit for tat brutalized the whole dialogue - and both sides
scrambled to secure politicians in a sort of labor-relations arms race. "Labor" and "management" have
been at odds - sometimes violent odds - ever since. It's no surprise to me
that Marx and Engels, products of the early industrial era, saw everything
in terms of class conflict.

Absent government coercion to be used as a weapon by one side or the other,
organized labor and management would have worked out their differences in a
very different way. If one union bargained collectively for a high wage for
their members, another union could bargain for a lower wage for their members
and get the jobs. Or the company could decide to hire non-union employees and
take on the extra burden of dealing with each employee individually. It would
be a normal market process that would discover the right price for reliable
labor at any given time and place.

As with so many things, it's the state and its coercive power that's the problem,
not the unions. Nor management.

Doug: Exactly. It was also a time in history when society was changing
from an agricultural base to an industrial one, so of course there was turmoil.
Just like today.

Suppose some Mexicans or Salvadorans living in Detroit got together today
and formed a union for Hispanic people and offered to build cars for half the
wages the current unions are getting. They could even allow non-Hispanics to
join the union - to try to defuse the inevitable accusation of racism - but
the deal would be that you join to get steady work in exchange for willingness
to work cheap. Would the mouthpieces of Big Labor stand up to defend them?
I doubt it.

To read the rest of this 5-page interview, including Doug's thoughts
on labor unions and why Big Business is on its way out - simply click
here.

Louis James' background in physics, economics, and technical writing prepared
him well for his role as senior editor of the International Speculator and
Casey Investment Alert. Like Doug Casey, Louis constantly travels the world,
visiting highly prospective geological targets, grilling management and company
geologists, and interviewing natives in a variety of languages to find out
what they really think (he's fluent in French and Spanish, and speaks a little
German and Russian).

Whether it's days of back-to-back meetings with mining company executives
in Vancouver, pounding on rocks in the Democratic Republic of the Congo, examining
drill core in Argentina, or eating food with names he can't pronounce with
local miners in China, Louis is constantly looking for the next double-your-money
winner.

He evaluates dozens of companies every month, conducts due diligence of only
the best, and then compares notes with Doug in order to bring only those most
likely to provide rapid high returns to our subscribers' attention. Louis also
reads all the press releases, financial statements, and an enormous quantity
of related information to keep track of all of our mineral companies and has
become something of a walking database on same.

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